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Barker confirms 21p FIT rate: could this spark another mini solar boom?

Posted by Cathy Debenham on 15 December 2011 at 10:21 am

In an uncertain world even a little bit of clarity is good, so we welcome energy minister Greg Barker's confirmation that, whatever the outcome of the consultation, the 21p rate of feed-in tariff (FIT) is fixed for the period from 12 December 2011 to 31 March 2012. That means that all systems installed in that time will receive that rate (index linked) for the full 25 years of the feed-in tariff.

There is potential for this news to cause another mini boom in solar installations for a number of reasons:

1. Even with the cut in feed-in tariff to 21p, installers are still able to offer 8 - 12% return on investment for a well sited solar PV installation.

2. There's a possibility the tariff may be cut again from 1 April.

3. It is very likely that new criteria for eligibility will be introduced from 1 April 2012, which will mean that buildings must meet strict energy efficiency levels before they qualify to receive the tariff.

4. Solar is very popular with the public. A Sunday Times YouGov public opinion poll at the end of November found that 74% of the public want more solar than there is at present, and 67% think that it's a realistic way of combating climate change (this link downloads a pdf).

5. A lot of installers have panels they ordered before the review in tariffs that are still in transit - so there may be deals to be done.

While you might not have won the jackpot of the 43p tariff, there's still plenty of people for whom solar PV makes sense. Have a look in our directory for a local solar PV installer and ask them round to survey your home or work place to see if it makes sense for you. You may want to watch our video on choosing an installer first.

Photo by Vince Alongi

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If you have a question about anything in the above blog, please ask it in the comments section below.

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Comments

5 comments - read them below or add one

Cathy Debenham

Cathy DebenhamComment left on: 13 January 2012 at 5:07 pm

My view is that if you're talking return on investment you have to compare with an annuity (where you don't get your capital back) and not with an ISA or similar (where you do).

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NorthGlosEPC

NorthGlosEPCComment left on: 7 January 2012 at 6:08 pm

Explore Solar,

Not quite, return on investment and savings account returns are not the same.

The fairest way to look at it is to say given a working life of 25 years for a solar system what do I end up with at the end compared to just leaving the money in a savings account.

There are of course unknowns. What will savings rates be over 25 years and what will be the index linked rate be over 25 years for the feed in tariff? Variations to either make a difference to how much you make or how much you could lose. And there are other unknown factors like system efficiency towards the end of working life, system life itself, end of life decommissioning costs and even "will I live long enough to see out this 25 year deal".

If you buy a 4Kw system for £10,000 and get 3424 Kwh per year (your figures) out of it, at 21p FiT thats £719 per year. Or £17,976 over 25 years. Of course if the FiT is index linked the final amount will be more but that's one of the unknowns. You may also find your inverter goes pop after 10 or 12 years leaving you to find another £1000 to £1500 and thus also affecting the final total, another unknown.

If you leave your £10,000 in a savings account and let the money grow through interest, which currently will be around 2.4% after tax the total at the end of 25 years will be £18,092. That assumes the interest rate stays at 2.4%. Of course interest rates over 25 years and rates of inflation are unknown factors which could also affect the final total.

Now interest rates will change over 25 years, as will the index linking rate of the FiT and your inverter might last the course, who knows.

But I think at 21p FiT there will be nowhere near good enough incentive to go solar. Too many unknowns that will affect greatly the final outcome. At 43p there was good incentive so long as you were happy to be locked in to a 25 year deal.

So let's not mislead people with "return on investment" projections let's look at what we know and what we don't know and decide viability on that.

My view still is that a reduction in the FiT from 43p to 21p has killed it, and that was a big Governmental mistake which will make Co2 output reduction targets much more difficult to achieve.

 

 

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Explore Solar

Explore SolarComment left on: 5 January 2012 at 2:26 pm

If you have a south facing a 4Kw system it will generate 3424 kWh per year. Which will give you a rate of return of 7.19% ( at 21p) for a system costing 10,000. Which is still better than any saving account. We are offering 8-12% depending on the panels selected. http://www.exploresolar.co.uk

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NorthGlosEPC

NorthGlosEPCComment left on: 29 December 2011 at 1:52 am

Cathy,

I'm all in favour of Solar PV and I'd like to see the FiT remain at 43p, although financed via treasury money rather than through unfair stealth taxes on energy bills.

It seems to me that a FiT of 21p is clearly the beginning of the end and a bad mistake on the part of the Government. We'll see if PV has a future over coming months by seeing just how many installations there are.

I applaud your efforts to give this dying industry the kiss of life through your encouraging blogs like the one above. However lets be accurate, or at least lets not be tempted to encourage with statements bordering on the misleading.

People will see your point number one, 8% to 12% return on investment and compare this with say deposit account interest rates. Not the same are they? You can take back your investment from the building society anytime. The building society won't force you to wait 15 years to achieve "payback" before you show any real return will they?

You also suggest taking advice from an installer? The very people who will be put out of business following a cut to 21p FiT. Tempting for even the most honest of them to embelish the return figures when faced with going bust.

At 43p it worked, although even then the returns wern't really as good as installers sales people suggested, but it compared favourably with alternative investments so long as you were happy with the lock in.

At 21p it won't work unless installation costs reduce by 50%. They won't, and even if they suddenly did it would suggest previous customers were being ripped off.

Of course if your motives are purely ecological you'll stump up the cash even if the FiT were abolished, and I applaud this too. However lets be honest most of us will be looking at the numbers.

 

 

 

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Fred1

Fred1Comment left on: 20 December 2011 at 10:57 am

It is my understanding that the cost of a 4Kwp system has to fall to

£4500 ie less than half what it is now, to give a rate of return of an indexed linked 7.5 % savings account.

Let me know when the cost drops to that point....

Fred

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